Empowering locals: Does the State care?

By Richard Mgamba

25th March 2012

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The Late Mwalimu Julius Nyerere

On the 50th anniversary of the Independence of Tanganyika, I was asked by the British Broadcasting Corporation (BBC) to give my views about the success and failures during the past five decades of governing ourselves.

One of the failures, which I strongly spoke about, was failure by the state to empower locals especially the indigenous to own their economy.

I made it clear that it was a shame to have an economy controlled by minority group mainly foreigners, who owns 80 percent of the economy, while the majority were still singing the ‘agriculture is the backbone of the economy’ song, fifty years of independence, left with only the meager 20 percent.

My views was that after five decades of governing ourselves, the State has failed to create a strong middle class, which would have apart from controlling the economy, captured the growing economic empire in the Great Lakes Region, currently dominated by Kenya and South Africa.

While Tanzania played a crucial role in the liberation struggle in Southern African countries, fifty years of independence, the country totally failed to empower locals so that they can control the economy effectively.

The Late Mwalimu Julius Nyerere tried differently to empower Tanzanians but was overtaken by corruption, mismanagement and the events of our time, something that was very painful for him to witness especially in 1990s when global forces started marketing capitalism as the new world’s order.

Ali Hassan Mwinyi also tried to empower locals in his own ways, and in fact in my views, after him no any president has managed or even thought about the important since of empowering locals especially indigenous. Neither President Mkapa nor Kikwete have taken any specific measures to empower locals, though both of them claimed to build a better living for all.

Mkapa came, conquered and left behind a robbed nation where all vast mineral resources were freely given hundred percent to foreigners. He sold many State corporations at a throw-away price whereby there was a minority of crooks who created syndicate to buy our ‘economy’.

Some bought these corporations then turned them into warehouses, while others used them as collateral to borrow money, which was invested elsewhere locally or abroad. This wasn’t empowerment, but just robbing the poor to give to the rich who are from the minority society.

Kikwete came with the slogan ‘better living for all’; launched by the move to dole out Sh21 billion in all regions, but this wasn’t empowerment. Empowerment is not about dishing out free money; it’s about creating an environment that favoured locals to achieve tenders, jobs, business and investments.

That’s the meaning of the Chinese proverb; don’t give a man fish, just teach him how to fish. President Kikwete also brought the new Mining Act of 2010, but still locals were not empowered, let alone prepared to invest in this technically and capitally challenging business arena.

Yes, we have good Mining Act, but still foreign mining firms import beefs, toilets papers, stationeries and many more from abroad. We forced them to procure goods locally, but what they have done is the opposite; inviting foreign firms from South Africa and Australia that used to supply them to register as local companies in Tanzania so that they can continue with their supply chain at the expense of local companies.

When we talk about benefits from the large scale mining, it is not just about taxes and royalties, but the multiplier effects. The supporting sectors should be locally owned and managed so that if annually the spending in procurement industry is $2 billion, then 50 percent of this should go to local suppliers.

Unfortunately, this is not the case because everyone who has criticised the industry including the legislators has been mainly singing the same old song; ‘we are being robbed’.

If the large scale mining industry was in Kenya, their shilling would have been the strongest three times what it is today, while the supply chains would have been dominated by the locals. In Tanzania, gold exports alone reached $2.2 billion by the end of 2011 up from $1.48 billion in 2010, but still our shilling was the weakest in the region.

Today, you have African Barrick, a company that operates only in Tanzania, but its financial base is in Johannesburg, while the headquarters is in London and Dar es Salaam is just a proxy corridor. If $2.2 billion was returning in the country, its impact would have strongly been felt by local banks.

In a country like Kenya, since the Mzee Jomo Kennyatta era till today, the State has purposely created a system that enables locals like the late John Michuki, Njenga Karume, Jimna Mbaru, and many more to own the economy as well as creating broader tax regime as well as employment for millions.

As a result today, Kenya can afford to finance its blotted national budget by 90 percent through domestic revenues, while ours depends on donors by 48 percent despite the fact that we have more natural resources including arable land than our neighbouring country.

While there may have been some technical problems with the Kenyan empowerment, since they were not angels, the success resulting from this move is bigger than the failure of not doing anything for locals, which Tanzanians has chosen as its path.

Today, if there’s any tender from the government even the one financed by our domestic revenues, the State and its agents will go for a foreign firm. Instead of creating a condition that allows locals to form consortium with foreigners to ensure that a bigger chunk of the money remains here, our beloved government has fallen in love with foreigners.

Is it fair for instance to allow a foreign campany to compete for $900,000 road project in Tanzania? What will locals do then? Can a Tanzanian firm be given the same in Kenya or China even if Jesus Christ was the Chief Executive Officer?

When locals have made their fortune, the big chunk of it will remain here through capital re-investments, but if it is a foreigner, 90 percent shall be wired to UK, Canada or elsewhere.

Alarmed by the wider gape between the minority(whites) and the majority(blacks, coloured), the post apartheid South Africa introduced Black Economic Empowerment(BEE) in order to enable the marginalised to own the country’s economy.

Black Economic Empowerment (BEE) is a programme launched by the South African government to redress the inequalities of Apartheid by giving previously disadvantaged groups (black Africans, coloureds, Indians and some Chinese[1]--who are SA citizens, while this is happening, all white people are treated unfairly in this act) economic opportunities previously not available to them. It includes measures such as Employment Equity, skills development, ownership, management, socioeconomic development and preferential procurement.

After the transition of Apartheid in 1994, it was decided by the government of the African National Congress that direct intervention in the distribution of assets and opportunities was needed to resolve the economic disparities created by Apartheid policies which had favoured white business owners.

BEE intended to transform the economy to be representative of the demographics, specifically race demographics of the country. BEE was defined in the 2001 Commission Report as follows,

"It is an integrated and coherent socio-economic process. It is located within the context of the country's nation transformation programme, namely the RDP (Reconstruction and Development Programme). BEE was aimed at redressing the imbalances of the past by seeking to substantially and equitably transfer and confer ownership, management and control of South Africa's financial and economic resources to the majority of the citizens. It seeks to ensure broader and meaningful participation in the economy by black people to achieve sustainable development and prosperity."

Today, though it didn’t achieve its objective by 100 percent, BEE has enabled many South Africans to own their economy as well as creating strong middle class, buoyed by the entry of blacks, Indians and coloureds in the economic ownership.

African National Congress thought about BEE and introduced it, but its partner in struggle, Chama Cha Mapinduzi is not aware about the economic danger that we face today as a country. It has failed to introduce the policy that seeks to empower locals purposely in all key sectors including employment.

Does this country need a shop or factor manager from India fifty years after independence? Do we need these Chinese to operate as motor vehicle mechanics in this country? But, today, we have them every where and they will soon start the race to State house claiming to be true patriots.

While success in business does depend in several factors, but the State has the role to play especially when it comes to locals. When African barrack Gold listed its share at London stock exchange, we expected the State to take effective measures by encouraging and empowering locals to own at least just 5 percent of what is being sold, but nothing happened.

South Africa's policy of black economic empowerment (BEE) is not simply a moral initiative to redress the wrongs of the past. It is a pragmatic growth strategy that aims to realise the country's full economic potential while helping to bring the black majority into the economic mainstream.

Like what South Africa did, Tanzania too needs a pragmatic growth strategy that aims at realising the country’s full economic potentials, while helping to give the black majority the economic ownership.

During the days when Privatisation was taking place around the globe, Russia, having just recovered from the collapse of the Soviet empire, introduced specific measures that enabled Russians to buy the all state corporations. Twenty years today, Russia has created billionaires, who are then assigned to capture the foreign economies abroad.

All lucrative state corporations were sold to selected locals, who were then given an opportunity to revive and develop them for the better future of Russians and their country.

In Tanzania, Africa’s largest textile mill, Mwatex was sold at a throw away price of $2 million to a man who has never even owned a small cotton ginning plant. Today, ten years since the factory was sold to the Asian tycoon, nothing has taken place.

Mwanza Tanneries was sold to another business tycoon at a throw-away price, and the factory has become a garage for Caspian Ltd. Nothing has taken place, with no any new investments or initiatives taken to revive it. This wasn’t empowering locals, but just another form of robbery through the paper work.

You can’t have meaningful privatisation without having ‘Economic Intelligence Unit’ that vets all potential investors including locals to ensure that they are capable of managing the given resources. Since we didn’t have it, some crooks from the very same minority masquerading as investors, outsmarted the State -and took all lucrative businesses at the expense of majority.

For instance how do you give Africa’s second largest textile plant to an Asian businessman whose big business in Mwanza was ‘a shopkeeper’? Because there wasn’t any vetting authority with a strong background of how the global economy works, some crooks outsmarted the government few years back.

Editor’s note: We strongly welcome feedbacks, comments or opinion about this topic and we shall publish them after editing. We would like to hear from our readers especially experts in business, economics as well as local businesspeople.